How to Start a Payroll Service Company

Most of the time, handling payroll and taxation can be a very stressful task for small scale businesses. Owners of small scale businesses usually look to hire someone who can do all these tasks for them, relieving them of the extra burden. The complex nature of the taxation and payroll system has encouraged people to set up companies whose core operation is to keep track of these two tasks for other businesses. If you are also planning to start your own payroll service company, you must first assess the resources needed to run the business.


  • 1

    Develop a plan

    Develop a plan about how your payroll business will be run. The plan will typically include the operations, marketing, and financing for the business. If you organise a business well before starting the company, you will have no trouble finding more resources in order to run your business successfully, and raising funds will be much easier too. You also need to determine how you will be reaching your clients in a market where you will be facing stiff competition. Don't forget to mention in your plan the number of staff you will be hiring at the start. Hiring a good staff is a must in a payroll business if you do not want to start off on the wrong foot.

  • 2

    Decide on a business structure

    Decide on the business structure your payroll service will be following. You can choose one from partnership, sole proprietorship and corporation. Since it is a small scale business, a partnership or sole proprietorship will be best for you. Be sure to check with the IRS (Internal Revenue Service) for legal aspects and tax obligation as each business structure is required to follow distinct legal guidelines and regulations.

  • 3

    Get your EIN

    Getting an Employer Identification Number will be a major step in your efforts to set up a payroll service company. Check with the IRS to learn about EIN, as partnerships and corporations typically need this number. However, if you have decided to start a sole proprietorship business, you can simply obtain a Social Security number. However, be sure to check with the IRS (even if you are going to start a sole proprietorship business).

  • 4

    Get a business license

    You will need a business license to set up your company and operate in a particular city or area. Be sure to check with the city government or the county courthouse to know what to do about getting the license. The city government will check to see whether your business is in accordance with the local laws or not.

  • 5

    Work with an attorney

    Get in touch with an attorney who will prepare the necessary legal documents for your business. Once this is done, your business is good to go.

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